Despite the importance of duplicate genes for evolutionary adaptation, accurate gene annotation is often incomplete, incorrect, or lacking in regions of segmental duplication. We developed an approach combining long-read sequencing and hybridization capture to yield full-length transcript information and confidently distinguish between nearly identical genes/paralogs. We used biotinylated probes to enrich for full-length cDNA from duplicated regions, which were then amplified, size-fractionated, and sequenced using single-molecule, long-read sequencing technology, permitting us to distinguish between highly identical genes by virtue of multiple paralogous sequence variants. We examined 19 gene families as expressed in developing and adult human brain, selected for their high sequence identity (average >99%) and overlap with human-specific segmental duplications (SDs).We characterized the transcriptional differences between related paralogs to better understand the birth-death process of duplicate genes and particularly how the process leads to gene innovation. In 48% of the cases, we find that the expressed duplicates have changed substantially from their ancestral models due to novel sites of transcription initiation, splicing, and polyadenylation, as well as fusion transcripts that connect duplication-derived exons with neighboring genes. We detect unannotated open reading frames in genes currently annotated as pseudogenes, while relegating other duplicates to nonfunctional status. Our method significantly improves gene annotation, specifically defining full-length transcripts, isoforms, and open reading frames for new genes in highly identical SDs. The approach will be more broadly applicable to genes in structurally complex regions of other genomes where the duplication process creates novel genes important for adaptive traits.